Guest Blog: Special Needs Trusts, Expanded Medicaid, and the Able Act

We are fortunate to work closely with many outstanding colleagues in the
legal community. Our Team often works hand-in-hand with attorneys Janet
L. Lowder and David S. Banas (Hickman & Lowder Co. LPA) to address legal and practical issues that arise when representing injured
children or catastrophically injured adults, requiring probate court involvement
in, for example, establishing special needs trusts. Their work exemplifies
the outstanding contributions by Janet and David on behalf of many of
our clients. We are delighted to share their Guest Blog, which is an excellent
piece on Special Needs Trusts.

For decades, Special Needs Trusts have been the primary tool to maintain
or ensure a disabled individual’s eligibility to receive governmental
benefits after receipt of settlement funds or awards. Now, with the implementation
of expanded Medicaid through the Affordable Care Act, and the ABLE Act,
those with disabilities have a broader range of options in obtaining and/or
protecting health insurance and supplemental income. In the right circumstances
and with careful planning and advice from a qualified Special Needs attorney,
the disabled can strategically utilize SNTs, Expanded Medicaid, and ABLE
Accounts to maximize flexibility and independence for individuals with
disabilities.

SPECIAL NEEDS TRUSTS

A Special Needs (Medicaid Payback) Trust is a trust arrangement that allows
an individual with disabilities to have funds available for his or her
needs without the funds counting as a financial asset for benefit eligibility
purposes. Many government programs that provide income or payment for
medical services and assistance to individuals with disabling conditions
have strict financial eligibility limits. Without careful planning, assets
received by a child or adult who is enrolled in or may be eligible for
these benefit programs (such as Supplemental Security Income or Medicaid)
can jeopardize eligibility for those programs.

Typically, Special Needs Trusts hold assets received by the person with
a disability through a personal injury settlement, jury award, or an inheritance.
The beneficiary of a Special Needs Trust must be under 65 when the trust
is established; the individual must meet the definition of disability
under the Social Security Act – Title II; and the trust must include
a Medicaid reimbursement provision. A parent, grandparent, legal guardian,
or a court must establish the trust. That simply means that a parent,
grandparent, or legal guardian must sign the trust agreement, or a court
must order creation of the trust; however, there is no requirement that
the person establishing the trust contribute funds for deposit into the
trust. There are also guidelines for using the trust funds; for example,
it is generally best to use trust funds to purchase “supplemental”
goods and services, not food, shelter, or clothing or items that government
programs ordinarily provide.

A pooled trust is a Special Needs Trust that may be advisable when a smaller
amount of assets is involved and when it is in the best interests of the
individual for a professional to make decisions about investments and
distributions (payments out of the trust). An individual with a disability
can establish a pooled trust account on his or her own behalf; therefore,
it can be an appropriate choice when he or she has assets to place in
the trust but does not have a parent or grandparent available to enter
into a trust agreement. Nonprofit organizations must establish and manage
Pooled trusts; they are available in most states.

A Special Needs Trust can be established even after an individual has received
funds directly and therefore has assets above program eligibility limits.
Transferring funds to a Special Needs Trust (which includes some pooled
trusts run by nonprofit organizations) is permissible under federal law
and is one of the very few ways an individual can legitimately transfer
assets in order to re-establish benefit eligibility.

Special Needs Trusts continue to be necessary planning tools to maintain
eligibility or ensure future eligibility for Medicaid and SSI, especially
for an individual with developmental disabilities or those who are severely
medically involved. The Waiver programs and the DD system provide services
paid for by Medicaid, which are not available elsewhere. Examples of these
valuable services are group home staff, vocational and adult day programs,
transportation, and nursing care and therapy in the home.

EXPANDED MEDICAID (MAGI)

For individuals not on SSI and need only traditional medical coverage,
the need for an SNT may not be imminent. In states like Ohio, which have
implemented the ACA’s Medicaid expansion, certain individuals who
could receive Medicaid based on blindness or disability will be eligible
to receive health insurance under a MAGI coverage group. Prior to the
adoption of the ACA, individuals could not purchase health insurance in
Ohio if the individual had a preexisting condition. Beginning January
1, 2014, individuals between the ages of 19 and 64 who earn less than
138% of the Federal Poverty Level are eligible to receive Modified Adjusted
Gross Income (MAGI) Medicaid. For a single individual, that income threshold
is $15,856 per year, or $1321 per month. If individuals have income greater
than 138% of the Federal Poverty Level, the individual can purchase insurance
on the exchange and would likely receive subsidies and tax credits, depending
on income. There is no resource limit to qualify for MAGI insurance. Thus,
if a disabled individual with low income needs health insurance but is
over the current $1500 Medicaid resource limit, coverage under the MAGI
program could provide the stopgap while the beneficiary determines whether
an SNT is appropriate going forward. A beneficiary would lose SSI (assuming
their resources were over $2000), but would maintain health insurance
coverage. Those eligible for MAGI will receive essentially the same benefit
coverage as would be received under the Medicaid program. These benefits
are distributed through a Managed Care provider.

THE ABLE ACT

In December of 2014 the Achieving a Better Life Experience Act of 2014
(ABLE Act) was signed into law by the President. After eight years of
consideration and development, the ABLE Act provides a vehicle for qualified
disabled individuals (disabled prior to the age of 26) to establish tax-free
savings accounts to meet their special and supplemental needs. Congress
rooted the ABLE Act in the 529 education savings plans that many families
utilize to save for the costs of college tuition. The ABLE Act allows
anyone to establish a special savings account for the benefit of a qualifying
disabled beneficiary to pay for disability-related expenses. Earnings
in the account are not taxable, and the funds will be unavailable resources
for SSI and Medicaid. However, there are significant limitations and pitfalls
avoid. For instance, ABLE accounts do have a Medicaid payback provision.
Total annual deposits are limited to the annual gift tax exclusion amount,
currently $14,000. While any person may contribute to an ABLE account,
a beneficiary may only have one account.

Ohio Representatives Margy Conditt and Jonathan Dever and Senators John
Eklund and Shannon Jones have sponsored legislation that enables the creation
of these ABLE accounts in Ohio. Soon, individuals with disabilities can
establish ABLE accounts into which they can deposit small inheritances
or gifts. A competent disabled individual who is a plaintiff in a personal
injury suit could utilize the first $14,000 received in the case by funding
an ABLE account and enjoy the benefit of that supplemental fund outside
of an SNT. Child support for a disabled person can be deposited into an
ABLE account and saved. ABLE accounts will be particularly useful for
small inheritances, lottery winnings, or residual monthly savings.

Like the expanded Medicaid program, the new ABLE accounts provide another
tool in the important work of maintaining or protecting Medicaid or SSI
benefits. It also provides individuals the ability to establish accounts
and save without having an SNT prepared.

MORE OPTIONS, MORE FREEDOM

Special Needs Trusts will remain the keystone of planning for those with
disabilities. Circumstances will dictate the type of SNT utilized, funding
vehicles, and court involvement. Now, with expanded Medicaid and ABLE
accounts, multi-pronged planning that includes the use of SNTs, ABLE Accounts,
and stopgap insurance through MAGI permits a more reasoned and fair treatment
of those with disabilities.

Janet L. Lowder, CELA

Attorney Janet L. Lowder has devoted her career to defining, promoting,
and protecting the legal rights of the elderly, and of persons with mental
and physical disabilities. Janet's activities have encompassed individual
representation, litigation on a local and statewide scale, representation
of agencies and county programs serving people with disabilities and the
elderly, legislation, and publication in professional journals. She received
her law degree, summa cum laude, from Cleveland Marshall College of Law.
Janet is a recognized authority on Medicaid issues and estate planning
for families with special needs. She is a member of the National Academy
of Elder Law Attorneys and is a Certified Elder Law Attorney (CELA) by
the National Elder Law Foundation.

David S. Banas, J.D.

Attorney David S. Banas focuses his practice on estate planning and guardianships,
legal issues facing older adults and individuals with disabilities, Special
Needs Trusts, Medicaid, and long term care planning, as well as litigation
and appellate advocacy. Mr. Banas has been counsel in multiple federal
actions regarding the rights of elderly couples in relation to Medicaid.
He is a graduate of the Capital University Law School in Columbus, Ohio,
and the Ohio University in Athens, Ohio, where he received his degrees
cum laude. Mr. Banas has co-authored articles appearing in the Probate
Law Journal of Ohio and is a frequent presenter at various events, such
as the Ohio State Bar Association’s Elder Law Institute and the
Ohio State Bar Association Annual Convention.

Cleveland Personal Injury Attorneys

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